Building Condos in Detroit Made Easier

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BUILDING REHABILITATION: City condos more common with fewer title obstacles

November 29, 2003

BY JOHN GALLAGHER

FREE PRESS BUSINESS WRITER

The big news about residential developments in the once-bleak landscape of midtown Detroit is that such projects are, well, no longer big news.

A few months ago, with little fanfare, Detroit developer Jim Wickenheiser and his partners opened the Carola condominium lofts project in the Brush Park district. The rehabilitated building, formerly a hotel, features 19 units selling for $140,000 to $220,000. It is nearly sold out.

Now the team is working on two adjacent properties, the 10-unit Lamar and the 49-unit Carlton. Prices will be $130,000 to $350,000. Already, Wickenheiser and his partners have taken reservations for about a third of the units that will come on line next summer and fall.

But if such developments are growing more commonplace in the heart of the city, they haven't necessarily become easy or simple to create.

Wickenheiser, 37, who gave up a law practice to work on redevelopment deals in the city, says he's spent four years or longer on the Carola and two adjacent projects. Most of that time went trying to clear title to the three buildings. The frustrating process included tracking down an absentee owner in Toronto.

"You look at it as a challenge," he says. "And once you get into it you can't quit. It's not that it's insurmountable, but I would say that almost every deal put together in the city is close to a nine or a 10 in difficulty."

But if not for the faint of heart, redevelopment in Detroit may, in fact, be getting a little easier. Market acceptance is growing for Detroit projects, both on the part of developers and investors who bankroll projects like the Carola, and on the part of consumers who purchase the units in them.

Henry Hagood, director of planning for the city, says Detroit's efforts to promote home ownership in the form of condominiums finally is taking hold.

"People really didn't believe that condos would hold their value, but I think we're over that now," Hagood says. "This is the new urban way of living and it's coming to Detroit."

Meanwhile, some technical factors seem to be making it easier to redevelop in the city. And one reason topping the list is that gaining clear title is no longer the same old disheartening process it once was.

More often than not, when development officials cannot locate the owner of an abandoned building or vacant lot, it has been impossible for many redevelopment projects to go ahead. That's because the long-lost owner may emerge someday and sue for damages even after a project has been completed.

Title insurance is supposed to protect against that risk. But insurers were uncomfortable underwriting such policies because the process of notifying absentee owners was deemed to be full of holes, says Cathy LaMont, president of Detroit-based LaMont Title Corp.

Then, just recently, the state Supreme Court ruled that good-faith efforts to notify absentee owners were constitutional as long as all the proper steps were taken. Insurers suddenly became more at ease with the process.

LaMont, who has worked almost exclusively on Detroit projects since 1995, says as many as 40 percent of all proposed deals used to be stopped by title problems.

"The title defects are no longer a barrier to development," LaMont says. "They used to be a barrier; now they're a hurdle."

An easier land-assembly process is not the only reason redevelopment projects seem to be popping up in Detroit. Low interest rates have spurred new development, as have other factors.

Colin Hubble, a developer who recently completed an eight-unit condo project on Ferry Street in the midtown district and is working on another 52-unit project nearby, cites the creation of neighborhood enterprise zones in Detroit in recent years.

The NEZ legislation, first passed in 1992 and amended recently, cuts property taxes within a zone by about 75 percent for 12 years. That makes home ownership much more affordable.

Many developers like Hubble with projects in NEZ areas use the tax break as a marketing tool.

The comfort level is rising also because a number of projects have already succeeded. LaMont cites the example of the Crosswinds Communities condo and rental projects in the Brush Park area, where more than 100 new units have been built immediately north of downtown Detroit. That project convinced many other developers that money could be made in the city.

"It's a critical mass," she says. "Other people's investment is a little more secure in light of an investment there."

Hagood agrees.

"I think we lost a lot of people to the surrounding communities because we just didn't have any choices," he says. "We're getting some of them back and we're getting the critical mass."

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Guest donaltopablo

Guest donaltopablo

Excellent news for Detriot. Now this is the kind of thing that will turn around Detriots image, not trying to be negative, but lets be realistic, if nothing else, people have that impression. Changing that impression in peoples minds, and hopefully bringing it back to some glory.